May fuel price update

Price rises faster as £1 a litre returns to many forecourts

21 May 2009

Accelerating average UK petrol prices have risen to 97.68p a litre, helped by a 1.3p spurt in the past week, the AA's Fuel Price Report for May shows. Petrol costing around £1 litre has now re-appeared at motorway service areas in England and Scotland, and is common in rural parts of the UK.

The 2.67p increase between mid April and mid May is greater than the 2.33p fuel-only increase last month (ignoring the 2.12p increase in duty and VAT on April 1). This not only adds £1.34 to the cost of filling a typical 50-litre tank, but the £5.79 increased monthly spend on petrol for a two-car family would, over a year, wipe out half the savings from domestic energy price cuts announced last week1.

The average cost of diesel has gone up by less than a penny, from 102.69p a litre in mid April to 103.49p in mid May. However, 108.9p is not uncommon at motorway service areas and beyond what the AA considers reasonable, even for providing 24-hour driver facilities2.

Much of the blame for prices that are again draining family budgets, undermining leisure and high street spending, and making a consumer-led recovery from recession more difficult rests with stock market speculators. Oil prices that pushed up to around $60 a barrel this week were spurred on by markets betting on early economic recovery, despite oil's low demand and over supply. Even OPEC this week warned of "considerable risks" remaining from "persistent contraction in demand and growing supply overhang"3.

"Everybody is trying to pump up their profits at the expense of the motorist: market speculators want to rejuvenate their funds through dearer oil, the fuel industry has squeezed petrol refining to improve margins, the Government is increasing fuel duty to prop up its deficit, local authorities have increased parking charges to fill town hall coffers, and the list goes on," says Edmund King, the AA's president.

"This assertion that motorists are somehow better off because petrol prices are not as expensive as they were last summer, overlooks the fact that money and credit is now tight, people are losing jobs and having their pay frozen. If recovery from recession is to be consumer-led the last thing we need is excessive pricing at the pumps."

The UK's most expensive petrol is sold in Northern Ireland at 98.1p a litre, closely followed by Wales and the South West at 98.0. The cheapest is in Yorkshire and Humberside at 97.3p. Diesel is dearest in London and East Anglia at 104.0p a litre, with Northern Ireland cheapest at 102.6p.

Factfile

1With a 2.67p increase in the litre price, a typical petrol car, consuming 108.42 litres a month, would cost £2.89 a month more in fuel. Adding £5.79 to the monthly costs of a family with two petrol cars, this equals £69.48 over a year. Last week's cut in domestic energy bills will save families on average £132 a year.